Lack of reform to child benefit bad news for single-parent families, says Martin Lewis

Chancellor Rachel Reeves has defied calls to reform child benefit and change the way it is calculated – which money expert Martin Lewis branded “bad news” for single-earner families.

Child benefit will continue to be based on individual income rather than household income, meaning anyone earning £60,000 or more before tax each year must pay a high-income charge above that threshold.

In a couple where they both earn £60,000 or more, whoever earns the most must pay the charge - regardless of who claims child benefit.

Child benefit is withdrawn if the income of the higher-earning partner reaches £80,000 a year.

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The system has been branded “unfair” because if both parents earn under £60,000 they can keep all of the child benefit, but if anyone earns over – whether single or in a couple – they face the charge.

Parents claimed it could even restrict people’s career choices because they wanted to stay under the earnings limit.

Mr Lewis wrote on social media: “This is a shame and leaves inequity rife, bad news for single parent and single-earner families.”

He told BBC Radio 5 Live: “I’m very disappointed. I don’t like unfairness. The way our child benefit is paid is unfair to single parents and single-earner families.”

He said he had campaigned for a change, but Ms Reeves’s decision not to make the change was embedded in background documents produced for the Budget.

Former Conservative chancellor Jeremy Hunt announced new interim rules in his 2024 spring Budget to base the charge on household income instead of the highest earner, but the change was never implemented.

Wednesday’s Budget document stated: “The government will not proceed with the reform to base the high-income child benefit charge on household incomes.

“This is because it would have come at a significant fiscal cost of £1.4 billion by 2029-30 if setting the threshold to £120,000-£160,000, where no families would lose out.”

One parent told Mr Lewis: “I’m a sole income of 50k+ and I have to pay tax on my child benefits. Next door earn 85k across two incomes and don’t pay tax. How is this fair?”

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Chief secretary to the Treasury Darren Jones confirmed in a written statement that child benefit rates would rise across the UK from April, in line with CPI.

This will bring the rate for the eldest child to £26.05 per week, from £25.60, and for other children to £17.25 per week from £16.95.

As expected, Ms Reeves also did not scrap the much-criticised two-child benefit cap.

The Budget also increased the rate of national insurance employers pay from 13.8 per cent to 15 per cent, and the starting threshold is being reduced to £5,000 pounds a year from £9,100 as it is now. Smaller employers will have their allowance raised to £10,500.

Mr Lewis said while it was not a direct cost to employees, the higher national insurance “probably will have some knock-on effect with consumers and workers in the future”.

The Budget documents also revealed the chancellor has not extended the tax relief for first-time property buyers.

The relief for those buying their first home had been set at £425,000 on a temporary basis in 2022, but from April next year, the nil rate band will revert to £125,000, so an extra 20 per cent of first-time buyers will have to pay more in stamp duty, according to experts.

Mr Lewis also warned anyone on the minimum wage to ensure they were getting the full rise next year.

He said: “There are reasons you might not be getting the full minimum wage. They might not be factoring in the cost of your uniform. They might not be including all your work hours.”